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Geithner Comes Under Fire At AIG Bailout Hearing

Treasury Secretary Timothy Geithner told the House Committee on Oversight and Government Reform on Wednesday that it would have been "catastrophic" for the U.S. economy if AIG had failed.
Mandel Ngan
AFP/Getty Images
Treasury Secretary Timothy Geithner told the House Committee on Oversight and Government Reform on Wednesday that it would have been "catastrophic" for the U.S. economy if AIG had failed.

Treasury Secretary Timothy Geithner testified Wednesday that he had "no role" in what some lawmakers say were efforts by the New York Federal Reserve to conceal deals that funneled billions of dollars meant to bail out American International Group to big banks exposed to the insurance giant.

"I had no role in making decisions regarding what to disclose about the specific financial terms," the Treasury chief said.

Geithner appeared before a House panel looking into whether he had any direct involvement in withholding details of $62 billion in AIG payments to counterparties such as Goldman Sachs Group — and why some banks got 100 cents on the dollar.


Although he was head of the New York Fed at the time, Geithner said he "withdrew from monetary policy decisions ... and day-to-day management" once then-President-elect Obama announced his intention to nominate him to be Treasury secretary on Nov. 24, 2008.

But some of the members of the House Committee on Oversight and Government Reform expressed skepticism. California Rep. Darrell Issa, the panel's top Republican, said many lawmakers on the committee "have a hard time believing Secretary Geithner entered into an absolute cone of silence."

One lawmaker after another lit into Geithner, venting rising public frustration over bank bailouts and bonuses as Wall Street firms recover from the recession but unemployment remains at 10 percent.

Rep. Stephen Lynch (D-MA) told Geithner: "It just stinks to the high heaven what happened here. The disclosure was not there at the proper time to tell the American people and tell this Congress what was going on."

Florida Republican John Mica, recalling the controversy at Geithner's confirmation hearings over his failure to pay some personal income taxes, said: "You gave lame excuses then, you are giving lame excuses now. Why shouldn't we ask for your resignation as secretary of the Treasury?"


"You have a right to your opinion," Geithner responded.

AIG received a bailout of $182 billion from the Troubled Asset Relief Program, a decision that Geithner and his predecessor, Henry Paulson, have repeatedly defended.

"The consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses," Geithner testified Wednesday. He added: "I don't think there was a better alternative available."

Committee Chairman Edolphus Towns (D-NY) summed up what he said was the public's view of the bailout.

"In effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse," Towns said.

Although Geithner and Federal Reserve Chairman Ben Bernanke have drawn the most heat for the government's bank rescue, the effort began under Paulson during the Bush administration.

Paulson followed Geithner at Wednesday's hearing, reiterating many of the same points about the vital need to bail out AIG. The nation's largest insurer "could not be effectively wound down," he said, much as he would have preferred to do so. Paulson also denied any involvement in decisions about payments from AIG to its business partners and other Wall Street firms.

Bernanke said he was "not directly involved in negotiations" either. In a written response to the committee, he said the deals were handled primarily by the staff of the New York Fed.

The Federal Reserve chief also said the financial condition of those businesses "was not a factor in the decision regarding the amount paid to the counterparties or whether concessions should be sought from them."

From NPR staff and wire reports

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